Federal employees are beginning to “chase” recent market upticks in a manner similar to the period before the 2008 financial collapse, Thrift Savings Plan officials warned Monday.

Just 38 percent of total TSP assets are invested in the government securities (G) fund, members of the Federal Retirement Thrift Investment Board said at a monthly board meeting, marking the lowest level since February 2008. The G Fund, which invests in U.S. Treasury bonds, is the TSP’s safest offering.

“Usually this is a good thing,” said Renee Wilder, the board’s director of enterprise planning, “but I think participants are chasing the market.”

FRTIB has encouraged participants to invest more in equity funds that have seen greater growth in recent years, but the rate at which participants are reallocating their investments has sounded some alarms. The board officially approved a plan to switch the default fund for new enrollees away from the G Fund and into its lifecycle funds, though the move would require legislative action. Allocation in the G Fund has steadily declined over the last two years, dropping about 10 percent in that span. Participants moved more than $2.6 billion out of the G Fund in November alone.

Overall participation in the retirement savings plan is also trending downward. TSP officials said hardship withdrawals, staff reductions at agencies and an aging population are behind the decrease. The participation rate for workers in the Federal Employees Retirement System fell to 86.1 percent in November.

In 2012, about 90,000 TSP enrollees took hardship withdrawals from their accounts. Of those, 75,000 took just one withdrawal -- meaning they were eligible to resume contributing to their account after six months -- though 60 percent never came back. A high volume of withdrawals continued in 2013, peaking in October, when the government shutdown forced a record number of participants to take money out of their accounts. Through October, TSP had seen more than 117,000 hardship withdrawals this year.

Gregory Long, FRTIB’s executive director, said he was looking into the possibility of automatically re-enrolling participants who made withdrawals after the six-month waiting period expires. He acknowledged, however, that even if he is legally capable of issuing such a policy, it may not be in the best interest of the cash-strapped participants who cannot afford the retirement contributions.

Officials also noted that after three consecutive months of positive trends in TSP’s offerings, the plan is off to a rough start in December. Every fund within the plan is in the red so far this month.

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